Online shopping may be a highly convenient way to get just about any product that's sold, but given the somewhat impersonal nature of this purchasing channel, those same products are prone to being returned. As 2021 winds its way to a close, business owners are expecting to see more customers sending back their merchandise, further complicating an already highly unstable supply chain.

Nearly two-thirds of respondents in a recent Reverse Logistics Association survey anticipate an increase in product returns between September and December. Additionally, more than half of those same participants said they expect their costs stemming from those returns to rise as well.

Tony Sciarotta, executive director of the Reverse Logistics Association, noted that return activity has intensified throughout 2021, which has contributed to the supply chain crisis.

"The number of returns and costs associated with them continues to climb adding to an already tough environment of rising freight costs, capacity constraints and delays," Sciarrotta explained.

Return volume rose from the previous quarter as well, as 45% of respondents said as much, according to the RLA survey. The costs of those returns also increased during 2021's penultimate quarter for 56% of the poll's participants.

Most retailers are getting more returns  and they expect it to continue in the fourth quarter.Most retailers are getting more returns these days — and they expect it to continue in the fourth quarter.

Why returns can be costly
While the expenses related to shipping and handling may be viewed as unidirectional — from the seller to the buyer — business owners are forced to absorb a variety of costs when merchandise winds up returned to them. This includes those related to placing it back in inventory — a decision determined during the disposition process — transportation, packaging and the potential that the item may not resell. Since it costs money to make goods, anything that isn't sold is a loss.

Items bought online are particularly vulnerable to being returned. Indeed, according to a survey from the National Retail Federation, as a percentage of online sales, nearly 19% of merchandise was returned in 2020. This compares to 10% for goods bought in a brick and mortar environment. And for every $1 billion in sales, retailers absorb $106 million in return-related expenses.

American Eagle Chief Operating Officer Michael Rempell noted in an earnings call that as digital sales increase, so do returns. The goal is to identify how to position that merchandise so it can ultimately wind up in the right hands.

Returns often peak during the holidays, particularly after Christmas when everyone has received their presents. During the Thanksgiving holiday weekend, approximately 180 million Americans shopped, according to a separate survey from the NRF. While that total was more than what the trade organization anticipated, online shopping fell from 2020 by 17.6 million people.

As for the items buyers gravitated toward — whether in store or online — much of what was bought was clothing and accessories. Aside from this, roughly 50% of the items purchased over the five-day Black Friday weekend consisted of toys, books, music, video games and electronics. Clothing and electronics are the most commonly returned items, according to a survey from Power Reviews.

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